Distributed ledger technology has the potential to revitalise loyalty rewards programmes by replacing fragmented and clunky systems that depend on centralised administration with a trustless, digitised interlinked network, argues a new report from Deloitte.

While US enrolment in loyalty programmes has grown at an impressive rate over the last few years, Deloitte argues that these programmes are not realising their potential thanks to account inactivity, low redemption rates, poor client retention and high transaction and system management costs.

The central reason for these problems is the paucity of uniform management systems across programmes, which confuses customers, resulting in a lack of activity.

The report says that trustless distributed ledger could address this by enabling loyalty reward programme providers, administrators, system managers and customers to intersect and interact in one system without intermediaries and without compromising privacy or competitiveness.

In addition, providers would benefit from streamlined execution and administration of their programmes with near-real-time transparency, resulting in cost savings in the medium term.

Finally, says Deloitte, blockchain can be deployed through social media and digital wallets, and can interact with existing loyalty rewards platforms through smart contracts and associated digital architecture.

While lauding DLT’s potential, Deloitte says that for it to transform the loyalty market at least a handful of players with well-developed programmes need to buy into the technology.

“A best-case scenario is that a blockchain facilitator builds a network on a solid blockchain protocol and gets enough critical mass buy-in to develop standards for blockchain in the loyalty rewards space in general.”